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- You
lower your taxable income. The money that goes into
a Flexible Spending Account is subtracted from your gross
salary before the tax on your earnings is calculated.
In other words, your taxable income is reduced by the
amount of your annual Flexible Spending Account contribution.
And by reducing your taxable income, you reduce the taxes
you pay.
- Your
other University benefits are not affected. Your Flexible
Spending Account contributions lower your taxable income,
but they do not lower the amount of salary used to calculate
your other benefits - including your Retirement Plan contributions,
Long-Term Disability, Group Life Insurance and Travel
Accident Insurance.
- You
realize additional savings. Since contributions deposited
into your Flexible Spending Account are tax-exempt, you
are using tax-free dollars to pay your eligible health
care and dependent care expenses. Also, Flexible Spending
Accounts have a built-in budgeting component: when you
make your annual contribution, you have ensured that you
will have money available to pay for your eligible medical
and dependent care expenses. And with the prompt reimbursements
provided by SHPS, you will have access to the total amount
available for eligible health care expenses as soon as
the medical care is provided.
- You
receive immediate benefits. When you use a Flexible
Spending Account, you realize immediate tax savings every
payday. If you take medical expense deductions or claim
a dependent care tax credit, you cannot claim your savings
until you file your annual tax return.
- Having
a Health Care Flexible Spending Account may be more advantageous
than merely taking medical expense deductions when you
file your tax return. Only those medical expenses
that exceed 7.5% of your adjusted gross income can be
deducted when you file your annual federal income tax
return, whereas all amounts contributed to a Health Care
Flexible Spending Account - beginning with the first dollar
- are tax-exempt. And you'll be reimbursed even for small
amounts, such as co-pays, prescription expenses, and other
minor medical and dental expenses.
- Dependent
Care Tax Credit. Depending on your annual income,
a Dependent Care Flexible Spending Account may also be
more advantageous than taking a Dependent Care Tax Credit
on your tax return.
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